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Salary compression is a familiar dilemma to faculty members and administrators. Most campuses conduct regular analyses to measure salary discrepancies across academic departments, across generations of faculty members and between their own professors and those at other institutions.

Few colleges, though, have found a sustainable solution to relieve compressed salaries, especially in a period of budget cuts, shrinking state investment and rising tuition.

Administrators at Coastal Carolina University, a 10,000-student public university in South Carolina, think they have done so through what they call profit sharing. If the university is successful -- in this case, at increasing student retention -- then faculty members are rewarded with a pool of money that is divvied up to help alleviate compression.

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In the first two years of the program, the university has paid almost $2.5 million to qualifying employees, after consecutive increases to the retention rate. Equal amounts of money are set aside for both faculty members and staff who go through performance reviews.

This year, there is $400,000 on the line each for faculty and staff salary decompression and $150,000 for merit bonuses. To spend the money, the university’s annual retention rate has to increase from 67 to 68 percent.  

If the retention rate hits 69 percent, then the money increases to $500,000 for decompression and $200,000 for merit pay.

“The bottom line in all this is that if the university does well, it’s the administration’s and the board’s belief that we need to share with those who play a role in making the institution successful,” President David DeCenzo said.

The program was designed by faculty members, who had been tracking salary compression each year.

In general, compression happens when faculty members’ pay is limited by year-to-year increases that don’t keep up with market rates. Salary inversion happens when new hires make more than senior-level employees because they’re negotiating at market rates.  

Coastal Carolina faculty realized that if they wanted the university to pay for a decompression effort, they’d need to find revenue that wasn’t already budgeted for something else, said an associate statistics professor, Keshav Jagannathan. Jagannathan, as Faculty Senate chair, helped devise the program a few years ago with an associate math professor, Thomas Hoffman, who led Senate efforts on faculty welfare and development at the time.

They figured that if the retention rate went up, so would revenue from tuition money, part of which could be redirected to faculty salaries. “We’re not looking for that money in lean years when the university is struggling,” Jagannathan said. “We’re just looking for something in terms of meeting our goals.”

In the years leading up to the program's development, about 50 percent of faculty members had compressed salaries, and fixing those inequities would have cost, in total, between $1 million and $2 million, Hoffman said. Those figures come from a model based on comparing Coastal Carolina salaries to corresponding positions in a national sample of universities.

In the two years since, the program has been successful at decreasing the amount of compression at the university, though it’s hard to quantify by how much, since different positions are compressed at different levels. Plus, compression will grow each year if full cost-of-living adjustments or raises aren't in step with the national average.

Brian Bunton, for example, was hired in 2007, right before the economic downturn. He didn’t get even a cost-of-living adjustment for the first five years he worked there. During the first year of the compression relief program, his salary was increased 10 percent. Bunton is president of the university's chapter of the American Association of University Professors, and he said most faculty members support the program. 

The money is given to faculty members who meet the qualifications for being competitive and meritorious in performance reviews. But the program was designed to reach as many faculty members as possible. If there’s only enough money to relieve 80 percent of the institution’s compression, then all qualifying faculty members will get that portion of the amount their salary is compressed.

Student retention has benefited, as well. Projections show the university hitting a retention rate of 74 percent in the next three years, though administrators would like to surpass that.

Retention is obviously an important factor in student success and graduation rates, but it also affects the university’s cash flow. Prior to the Great Recession, Coastal Carolina’s retention rate hovered in the mid-60's. Then it dropped to 59 percent in 2009.

In efforts to improve the rate, the university has put money into student resources, by beefing up advising capabilities, encouraging faculty to take on more mentoring roles and improving tutoring services and other academic resources.

DeCenzo said this program is a way to get the faculty to buy in to the university's retention goal. Hoffman said that, anecdotally, it does seem that professors are participating in more activities and practices aimed at retention, such as taking attendance in all freshman courses and calculating grades in the middle of the term to identify struggling students.

Nationally, the average retention for first-time, full-time students at public four-year colleges was 79 percent in 2011, according to the National Center for Education Statistics.

Faculty interaction with students outside of the class settings is important for student success, and so anything colleges can do to encourage faculty to increase involvement with students is good for retention, said Alan Seidman, director of the Center for the Study of College Student Retention.

But Seidman worried about the possibility of grade inflation if faculty stand to benefit financially from improved student retention rates. He recommended collecting data to see if there's a difference in grade distribution before and after the program.

Administrators also stress that the faculty salary adjustments haven’t come on the backs of tuition increases. While tuition increased about 3 percent last year, it was flat for in-state students during the 2012-13 and 2013-14 years. Administrators are anticipating a modest increase next year.

The agreement for the compression program was for a three-year period, and administrators said after this year, they plan to turn it back to the faculty to see how faculty members want to move forward. Part of the program’s success has no doubt been because it rose out of faculty suggestions, they said.

“It’s also important to present it to your board of trustees in a way that demonstrates that it’s good for the overall university,” DeCenzo said.

Hoffman, one of the math professors who helped created the program, said the compression model needs to continue to be run annually, but he's more flexible on other details of the program. Right now, the money is tied to retention, because that's what the university is focusing on, but that could change in the future. 

Coastal Carolina isn’t the only university where the intersection of student retention and faculty pay has served professors well. Siena College in New York announced this week it will not pursue cuts to faculty pension contributions in light of an especially strong fall-to-spring retention this year.

Siena College, with about 3,000 students, has a consistently high retention rate, usually above 95 percent. This year, though, the college retained an additional 44 students it hadn't budgeted for, said Brother Ed Coughlin, president of the college.

The college had been anticipating a $900,000 budget deficit. Now, with additional tuition and room and board money from those 44 students, the deficit is projected at about $200,000. As a result, the university won't carry through with a plan to reduce by 3 percent contributions to faculty retirement plans, which would have saved about $500,000.

Coughlin attributed the college's high retention rate to an early-warning retention team that monitors students' academic performance, flexible access to advisers and a first-year seminar that fosters relationships between faculty and students. The college also has started a training program for resident assistants so they can recognize signs that students may be at risk of leaving and refer them to the proper resources.

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